2014: Year of Commodities (May)

Thus far in 2014, April ended on schedule and May arrived as expected. Well-placed
sources, wishing to remain anonymous as they are not at liberty to speak on
the matter, suggest that June will also arrive on time. That seems to sum up
the only accurate components of the consensus forecast for 2014. As the chart
below portrays, just about everything else continues to do the opposite of
what was generally expected by the popular seers on the future.

In the above chart are plotted year-to-date returns for several investment
measures. Bars on the left, the ones continuing to show significant positive
returns, represent the three components of the commodity sector. To the right,
using red bars, are what would be commonly referred to as underperforming groups.
The term "underperforming" is used by the Street so as not to admit they recommended
you load your portfolios with Techno/Junk losers. Oh, and what about the far-right
bar for GDX, the ETF for more mature Gold and Silver mining stocks? How could
that happen?

Perhaps the reason for the above results is a very simple truism.

When Russians are shooting
down helicopters in Eastern Europe, one buys real stuff not paper fantasies.

When the probability of armies shooting at each other in Eastern Europe is
a positive value, one buys real stuff. Armies possibly engaging in hostile
actions enhances the values of real "stuff". In such an environment one buys
Gold, Agri-Food, and oil, all of which have real value. One does not buy popular
Techno/Junk paper fantasies.

Might the trends pictured above continue? Yes, is the best answer to that
question for many reasons. One of which is a corollary to the investment rule
promulgated above.

When adversaries engage
in a shooting conflict, that situation is only resolved when one side is
exhausted.

Yes, interludes in hostilities may develop, but the overall situation is never
resolved by inept diplomacy. Fountain pens are only effective after the differences
have been fully resolved on the ground. One would have great difficulty finding
a similar situation in history successfully resolved by hot air from politicians
and the ink in their pens.

A second reason for the investment results portrayed above is another principal.

When someone is dropping
bricks on your head, move.

The Federal Reserve has now dropped the "fourth brick" on the heads of investors.
Some, having already recognized the situation for what it is, and have moved
out of the Street's Techno/Junk trading on the NASDAQ.

They have remembered the old monetary rule: Three steps and a stumble,
two cuts and a jump. The FOMC has tightened monetary policy four
times. That situation normally signals the onset of the beginning of a
bear market in financial assets. Rationalizing that likelihood may fill
time in the business media, but it will likely cost you money. Remember, "moving" out
of Techno/Junk into real assets such as Gold and Agri-Foods is still the
best defense against falling bricks.

So, will you move, or let bricks continue to pummel your head?

Ned W. Schmidt,CFA is publisher of The
Agri-Food Value View, a monthly exploration of the Agri-Food Super
Cycle, and The Value View Gold Report,
a monthly analysis of the real alternative currency. To contract Ned or
to learn more, use either of these links: www.agrifoodvalueview.com or www.valueviewgoldreport.com

Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT and
author of "$1,265 GOLD", published in 2003. A weekly message, TRADING
THOUGHTS, is also available to electronic subscribers. You can obtain
a copy of the last issue of THE VALUE VIEW GOLD REPORT at The
Value View Gold Report. Ned welcomes your comments and questions, and
tries to answer most all. His mission in life is to rescue investors from
the abyss of financial assets and the coming collapse of the U.S. dollar.
He can be contacted at ned@valueviewgoldreport.com